Jacob Austin 00:00:00 Hi all! Jacob Austin here from QS.Zone. And welcome to episode 108 of the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode, number 108, is a deep dive into two slippery topics from last week's episode on JCT subcontracts, program float ownership, and concurrent delay clauses. We did touch on these last week and I promised a proper follow up, so here it is. And as ever, if you're new to the show, then please do subscribe for more user friendly advice on all things subcontracting. So you get a new subcontract. Most subcontractors will be looking in there to determine that the price is right that the rates are right. Payment terms are what they expected. That the main contract has not been cheeky and stuck an extra discount on for 30 day terms that the scope looks right, but quietly in the background is the issue of float and concurrent delay. These can be dangerous issues because they shape how delays are allocated if they happen to you on site, and if you don't control them.
Jacob Austin 00:01:28 This could mean you getting penalized with delay damages that you didn't fully cause, or losing weeks of time without getting program relief from the contractor. So let's talk about the two things in isolation, and then we'll talk about how the JCT. 24 is shaping up to deal with them. So firstly float. What is float. This is the spare time in your programmer. It's breathing space. That means a short hiccup isn't going to derail your completion. It comes in a few different types. You can have non-terminal float or free float and this affects 1 or 2 activities that aren't critical to a program, usually because there's something longer that takes up more time and within reason, that activity can be started and finished as long as it fits within the period of the long activity without affecting the program at all. You've got terminal float, which is the difference between your construction period or your contract period, and how long your program is showing it's going to take for you to build it. So stupid example. Let's say you're building a house and your party is putting the roof on.
Jacob Austin 00:02:32 You know it's going to take you three weeks start to finish to get the roof completed, and you're showing that three weeks on your program, you've actually got four weeks on your contract. So if you start on the right day, you can afford to lose a week before you start moving. The completion date that week is your terminal float. It's your rainy day fund of time. And the Jets approach on this is absolute silence. It requires you to provide a program, but it doesn't say who owns the float and industry practice is generally treated float as a shared project resource. Whoever finds it first gets to use it. That might sound fair, but in reality it probably only benefits the employer or the main contractor. If you finish early in your program, they can issue late instructions that consume your float without triggering an extension of time that loses the benefit of your early completion and potentially your buffer for later issues. Let's say you plan your work with a one week buffer, but then you've organized your labor well.
Jacob Austin 00:03:35 The job is flowing well, materials are coming on time, and you're actually on track to now finish two weeks before your contractual completion date. But halfway through, the main contractor issues late drawings for a section, and it delays your work by two weeks. Because the JCT is silent on this, no extension of time needs to be granted because the completion date hasn't gone back. You carry on, but your safety net is gone. And now if your supplier misses a delivery. You have an overrun and suddenly you could be staring at actual damages or potentially liquidated damages if the job is overall delayed. And that means that even though you've been efficient and then the main contract is delayed, you you've ended up paying the price for it. And what I was suggesting in last week's episode is that certain amendments are coming out to show that all float is either owned by the contractor or float should we use to mitigate employer or contractor delay before any extension of time is granted, and that flips the risk completely. Your carefully owned float can become free insurance for the contractor and the client.
Jacob Austin 00:04:45 It's like somebody else has saved up all of their loose change in a jar, and by the time it's added up to £20, somebody else has come along and spent it for you. And ultimately, if you've finished early through your own hard work, then you should see the benefit from that jar of savings. That would seem fair, wouldn't it? Now, the other item that I mentioned last week, was concurrent delay under concurrent delays when two independent delays affect completion. But those delays overlap, and one is caused by you, for example, late materials and one is caused by your contractor or your client. Let's say late access to a particular section. If both of those issues overlap, then the job finishes late. But who bears the risk? I've previously spoken about the Malmaison approach to concurrent delay, and that arises from a court case between Henry Boot and Malmaison Hotel. That case has established the sort of the industry rule of thumb in that if irrelevant event, that is employer's risk coincides with the contractor's delay, then the contractor gets an extension of time.
Jacob Austin 00:05:54 So there's no liquidated damages, but the contractor gets no money for prolongation because their own delay contributed also to the job taking longer. And that is a sensible compromise that most contract administrators apply under an unamended JCT. Time, but not money, and it would be fair for the same to pass down in favour of a subcontractor if they and the contractor find themselves in the same situation. But in the case between North Midlands and Sidon Homes, the contractor was amended to say that if a delay caused by a relevant event is concurrent with the delay caused by the contractor, such delay shall not entitle the contractor to an extension of time. So when concurrency arose, the employer refused an extension of time, and that went all the way to the Court of Appeal, but the Court of Appeal upheld the clause, and they ruled that the parties are free to allocate concurrency risk however they like, so there is no EOT for concurrent delay. And that basically says because you've been stupid enough to sign up to that, Mr. Contractor, you can stand by it.
Jacob Austin 00:07:07 and that decision has changed the game. Since then, employers and main contractors have been dropping similar concurrency exclusion clauses into their contracts. So why does it hurt if you got that kind of amendment, if you and the main contractor are both late? Even if their issue is significant, then you get zero relief. Your completion date doesn't move and you can be hit with damages. So the risk profile changes completely under the Malmaison regime. You get time, but no money. Under concurrency exclusion, you get no time, no money. And that means potential for contra charges and damage deductions. And so what I was saying last week, the standard JCT subcontract allows float to be unallocated, and it's therefore shared in practice and concurrent delay isn't mentioned. So the more fair approach of the Malmaison principle applies. But common amendments trickling into subcontracts are that the contractor or the employer grabs the float, and that concurrency exclusions are wiping out your potential extension of time entitlement. So you're now in a situation where the buffer that you might have rightly earned on a project can disappear if the contractor delays you.
Jacob Austin 00:08:30 And there's a concurrent delay. So heads the contractor wins and it's tail as you lose. So what can you do with this? Well, the first thing you've got to do is read your subcontracts to understand whether these kind of amendments are being made. Many subcontractors out there don't. And it's only when things go awry that you are finding out what the black and white is that you've signed up to and what it means to you as a business. So here's your weekly reminder to read your subcontract before you sign it. Scan the amendments for words like float, concurrent delay, extension of time, and if you're seeing float belongs to float is owned by the contractor. An amendment relating to concurrent delay restricting the ability to apply an extension of time. Then you found the landmines and raise them before you sign up to the contract. What you want to negotiate are the more fair examples that we've already mentioned. That float doesn't belong to either party, and that if the contractor issues an instruction that delays you, then you should get an extension of time.
Jacob Austin 00:09:38 If concurrent delay is encountered. Then you want to see the Malmaison approach being applied, which would be wording to the effect of where an employer or contractors. Delays are concurrent with the subcontractors own delays. The subcontractor shall be entitled to an extension of time, but not to loss an expense if the contractor doesn't want to change his written clause on concurrency, then an alternative might be to agree a limit or a cap on your overall liability so that the issue hasn't got as big a teeth to bite you later. Another way to manage it is to manage your program smartly and proactively. That might mean being cautious about showing big tournament or float. If you have to submit a program, then be aware that displaying a big terminal float might result in you losing it. The more regularly you maintain your program, the more likely it is you're going to be able to determine whether delays are truly concurrent or not. And with hindsight, the lines will inevitably be blurred. So this is a case where, again, keeping those records, an important one of them being your up to date program is really going to help you out when it comes to Iate and potential claims.
Jacob Austin 00:10:54 The next thing you could do is give notices, give them early, give them as often as you need to the JCT. 24 already speeds up the EOT process, so don't let silence cost you. It's even easier to potentially get your hands on time for small delays. If they later argue that there is no concurrency extension of time, then at least you've reserved your position and you set the marker in the sand. If you're early enough in the process and you can't get any movement on the clauses, then you could price some risk into your subcontract rates for a time contingency. Perhaps that comes in the form of a bit of float that you're going to mask within your program, or it comes in the form of a bit of acceleration provision, so that you can pay for out-of-hours working to catch up and maintain the completion date. It's better to allow for it upfront than be blindsided and not be able to afford it later. Don't be afraid also to ask for a bit of legal support if there is a concurrency exclusion in a contract.
Jacob Austin 00:12:02 Remember, it will likely be upheld if it goes to adjudication or if it goes to court. You can't rely on its unfair arguments if you sign up to it, particularly if it's not your first rodeo, then the judge or adjudicator is likely to say that you are big enough and ugly enough to deal with what you've signed up to. So before it gets to signing up to it, take advice. Okay, so we've discussed some theory. Let's discuss a few case studies or worked examples to try and explain the principles a bit further. Let's say a subcontractor builds in a seven day terminal float, and they manage to maintain that float throughout 14 weeks of an 18 week program. Now, the main contractor issues a late instruction, and that instruction burns up for seven days. And because of a contract amendment, there's no extension of time for that seven days, because it's just used up float that the amendment says is owned by the contractor. Another two weeks in, a final piece of equipment is delivered three days late, and the subcontractor overall finishes late without any float left.
Jacob Austin 00:13:14 The subcontractor is now liable for delays, but had there been a more reasonable approach, the float would have been neutral. The main contractor's instruction would have meant an entitlement to an extension of time for the subcontractor. They'd have got their seven days extension, and they'd have then used up some of that seven days on their delay. Still finishing overall early against their adjusted completion date, it's clear to see the difference that that contract amendment makes. Now let's look at a concurrency trap example a steelwork subcontractor thought they had more bolts on site than they had, and they've managed to order in further stock, but it's caused them a four day delay at the exact same time, the main contractor has prevented them from putting up the last portal frame on site, and they've caused their own four day delay. Well, under the more industry standard Malmaison approach, the subcontractor would get four days extension of time without any costs. So it would mean they've got to stand their own cost of supervision of crane time or whatever their site overheads are.
Jacob Austin 00:14:24 But they also don't have to cut for liquidated damages. The contractor has to eat that up themselves if they can't recover that four day delay. But let's say the subcontract features a concurrency exclusion. So the contractor and subcontractors delays are concurrent. So there is no extension of time in this situation. They would get no additional cost and no additional time before they start paying liquidated damages. Again, quite a clear distinction, quite a big change in how the risk is approached on the project. Some big contractors will have people arguing for these contract amendments on their behalf. They probably also will have planners, programmers, whatever you want to call them, monitoring concurrent delays, monitoring the program for the site, making a little report every time they edit the program to show who's done what and why. What is behind. You're not likely to have that as a subcontractor. So you need these contract amendments to deal with you fairly, and you need to be able to spot amendments like this and understand what they mean to you as a subcontractor.
Jacob Austin 00:15:34 If you are taking on unbalanced float or concurrency clauses without realizing it, it's like walking into a minefield with a blindfold on. You're risking profit. You're risking viability of your business. You're risking one unfair and big delay wiping out a significant chunk of your margin. These aren't legal abstract toys that we're talking about. These are actual mechanisms that decide who pays for time. The JCT 24 hasn't rewritten rules on this, but contract amendments can and do, and they shift the risk and they shift the position against you. This is where you need to protect yourself by reading, by negotiating, and by managing these issues because your business may depend on it. Hopefully, today's episode has cemented in your mind why these two issues can be vitally important to you. My mission with the show is to help the million SME contractors working out there in our industry. If you've taken some value away from today's episode, I'd love it if you'd share the show and pass that value on to someone else who would benefit from hearing it.
Jacob Austin 00:16:42 And of course, subscribe yourself if you haven't already. Thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.QS.Zone for more information or you can check us out on all your favourite socials again at @QS.Zone. Thanks again! I've been Jacob Austin and you've been awesome!
